STRATA Skin Sciences Stock

STRATA Skin Sciences, Inc. operates as a medical technology company in dermatology dedicated to developing, commercializing and marketing innovative products for the treatment of dermatologic conditions.

The company's products include the XTRAC and Pharos excimer lasers and VTRAC lamp systems utilized in the treatment of psoriasis, vitiligo and various other skin conditions. The company's products also include the TheraClear Acne Therapy System utilized in the treatment of mild to moderate inflammatory, comedonal and pustular acne.

XTRAC and Pharos Systems and VTRAC Systems

The XTRAC and Pharos excimer laser technology emits highly concentrated UV light targeted primarily towards autoimmune dermatological skin disorders, such as psoriasis, vitiligo, atopic dermatitis, and eczema, among others. The XTRAC system received U.S. Food and Drug Administration (FDA) clearance in 2000 and the Pharos in 2004, and excimer laser has since become a widely recognized treatment for psoriasis, vitiligo and other skin diseases. VTRAC is a UV light lamp system that works in much the same way as the XTRAC. It received FDA clearance in August 2005 and Conformite Europeenne (CE) mark approval in January 2006 and has been marketed exclusively in international markets.

In its XTRAC system, the company's targeted therapy approach delivers optimum amounts of ultraviolet B (UVB) light directly to skin lesions, sparing healthy tissue. Many peer reviewed studies have proven that the XTRAC excimer laser can clear psoriasis faster and produce longer remissions than other UVB modalities, resulting in fewer treatments to produce the desired result.

The company markets four XTRAC excimer models. In October 2018, the company announced the launch of XTRAC S3, which, as compared to previous XTRAC generations, is smaller, faster and has a new user interface. In January 2020, the company announced the FDA granted clearance for its XTRAC Momentum Excimer Laser System platform. This clearance is the first full platform clearance since 2008. In February 2022, the company announced the commercial launch of its next generation excimer laser system, XTRAC Momentum 1.0, which delivers higher power and a faster repetition rate than the current models, along with a new user interface and slim design. The company continues to market the XTRAC Velocity, its third-generation laser and the XTRAC Ultra Plus, which is also a highly effective model marketed primarily in certain international markets. The Momentum, S3, Velocity and the Ultra Plus are capable of treating mild, moderate and severe psoriasis, vitiligo, atopic dermatitis and leukoderma.

The XTRAC excimer laser is marketed in the U.S. mainly under a recurring revenue model in which the company places the system in the physician's office for no upfront charge and generate its revenue on a per-use basis (referred to herein as the dermatology recurring procedures model or segment). The company estimates that there are over 1,000 XTRAC lasers in use in the U.S., of which 909 systems were, as of December 31, 2022, included in the company's dermatology recurring procedures revenue model. The Pharos business provides the opportunity for the company to convert the customer base to its XTRAC excimer laser system. The target U.S. audience for XTRAC lasers comprises approximately 3,500 dermatologists who perform disease management. Until 2019, in markets outside the U.S. the XTRAC laser had been marketed primarily as dermatology procedures equipment sales through distributors in over twenty-five countries. The VTRAC is marketed exclusively in international markets through the same distributors.

The company has signed distributor contracts by year as follows: 2019 - Korea, 2020 - Japan, 2021 - China, Israel, Saudi Arabia, Kuwait, Oman, Qatar, Bahrain, the U.A.E., Jordan, Iraq and 2023 - Mexico.

Studies have concluded that XTRAC treatment leads to significant improvement in psoriasis plaques and severity scores in as few as six to ten treatments. Treatment protocols recommend that patients receive two treatments per week with a minimum of 48 hours between treatments. The company's data shows that treatment with XTRAC excimer lasers has an 89% efficacy rate and produces only minimal side effects. In the support of its clinical effect, the XTRAC excimer lasers have been cited in over 45 clinical studies and research programs, with findings published in peer-reviewed medical journals around the world. The XTRAC excimer laser has also been endorsed by the National Psoriasis Foundation, and its use for psoriasis is covered by nearly all major insurance companies, including Medicare. XTRAC treatment is a reimbursable procedure for psoriasis under three Current Procedural Terminology (CPT) codes. There are three applicable CPT codes that differ based on the total skin surface area being treated. Insurance Reimbursement to physicians varies based upon insurance company and location.

Using the XTRAC and Pharos Excimer Lasers to Treat Vitiligo and Other Skin Diseases

The XTRAC technology is FDA cleared for the treatment of not only psoriasis but also vitiligo (a skin pigment deficiency), atopic dermatitis (eczema) and leukoderma, which is a localized loss of skin pigmentation that occurs after an inflammatory skin condition, such as a burn, intralesional steroid injection, or post dermabrasion.

XTRAC technology for vitiligo patients typically requires more therapy sessions than for psoriasis but is dependent on the severity of the disease. In the treatment of vitiligo, the XTRAC functions to reactivate the skin's melanocytes (the cells that produce melanin), which causes pigment to return. The company estimates that approximately 76% of insurers consider XTRAC treatments to be medically necessary for the treatment of vitiligo and therefore provide coverage.

STRATAPEN

In January 2017, the company entered into an OEM agreement with Esthetic Education, LLC to private label the STRATAPEN device. STRATAPEN MicroSystems is a micropigmentation device that provides advanced technology offering exceptional results. This contract expired in January 2020, but the company continues to sell this product on a purchase order basis.

THERACLEAR

In January 2022, the company acquired the TheraClear assets from Theravant Corporation. The TheraClear Acne Therapy System delivers a two-part process for treating inflammatory acne, pustular acne and comedonal acne that combines a vacuum and broadband light that has been proven to clear skin rapidly for fast and visible reduction in acne and associated redness. Treatments are very comfortable, take 10 minutes to perform, are highly effective, and can be used on all skin types.

Intellectual Property

As of December 31, 2022, 28 issued U.S. patents are in force, and many of these patents have foreign counterparts issued and pending. The company maintains 15 patents from Mela Sciences, Inc. related to the MelaFind product.

Customers

Domestically, the company's XTRAC customers consist of dermatologists and dermatological group clinics who partner with it primarily in its dermatology procedures recurring revenue model. As of December 31, 2022, the company had 909 partner clinics throughout the United States. Internationally, the company has been transitioning its international dermatology procedures equipment sales through its master distributor to a direct distribution model for equipment sales and recurring revenue on a country by country basis. The company has signed distributor contracts by year as follows: 2019 - Korea, 2020 - Japan, 2021 - China, Israel, Saudi Arabia, Kuwait, Oman, Qatar, Bahrain, the U.A.E., Jordan, Iraq and 2023 - Mexico.

Government Regulation

The company's products and research and development activities are regulated by numerous governmental authorities, principally the FDA and corresponding state and foreign regulatory agencies.

The U.S. Food, Drug and Cosmetics Act, or FD&C Act, and other federal and state laws and regulations govern the pre-clinical and clinical testing, design, manufacture, use, labeling and promotion of medical devices, including is XTRAC, VTRAC, STRATAPEN and TheraClear devices.

The company has received FDA 510(k) clearance to market its XTRAC and VTRAC systems for the treatment of psoriasis, vitiligo, atopic dermatitis and leukoderma. The FDA granted these clearances under Section 510(k) on the basis of substantial equivalence to other technologies that had received prior clearances.

In January 2020, the company announced the FDA granted clearance of its XTRAC Momentum Excimer Laser platform. The TheraClear device has been cleared by the FDA through the 510(k) process.

The company is subject to routine inspection by the FDA and, as noted above, must comply with a number of regulatory requirements applicable to firms that manufacture medical devices and other FDA-regulated products for distribution within the U.S., including requirements related to device labeling (including prohibitions against promoting products for unapproved or off-label uses), facility registration, medical device listing, adherence to the FDA's Quality System Regulation, good manufacturing processes and requirements for the submission of reports regarding certain device-related adverse events to the FDA.

The company is also subject to the radiological health provisions of the FD&C Act and the general and laser-specific radiation safety regulations administered by the Center for Devices and Radiological Health, or CDRH, of the FDA.

The company is approved by the European Union to affix the CE mark to its XTRAC laser and VTRAC lamp systems.

The company is also subject to the U.S. Foreign Corrupt Practices Act and similar anti-bribery laws applicable in non-U.S. jurisdictions that generally prohibit companies and their intermediaries from making improper payments to non-U.S. government officials for the purpose of obtaining or retaining business.

The Health Insurance Portability and Accountability Act of 1996 (HIPAA), as well as other federal and state laws apply to the company's receipt of patient identifiable health information in connection with research and clinical trials.

Engineering and Product Development

For the year ended December 31, 2022, the company's engineering and product development expenses were $1.0 million.

Competition

The company's major competitors for dermatological solutions include The Daavlin Company and National Biologic Corporation.

History

The company was founded in 1989. It was incorporated in the state of New York in 1989 and reincorporated under the laws of the state of Delaware in 1997. The company was formerly known as Electro-Optical Sciences, Inc. and changed its name to MELA Sciences, Inc. in 2010. Further, the company changed its name to STRATA Skin Sciences, Inc. in 2016.